COVID-19 Vaccine Update – Vaccination Rates and the Road Ahead

U.S Vaccination Rates

Sentiment towards the available COVID-19 vaccines has been mixed across the U.S.

Over the weekend there were reports of frontline healthcare workers refusing the vaccine. The numbers refusing are far from small, with some reports indicating that as many as 80% are refusing the vaccine in some centers.

The refusal to receive the vaccine comes as the U.S continues to fight an uphill battle against the COVID-19 pandemic.

According to Bloomberg, the U.S has administered 8.02m doses of the vaccine since 14th December. To-date. at least 272,429 recipients have completed the 2-dose regimen.

In all reality, however, the number of vaccinations is low relative to the number of distributed shots.

At the time of writing, Bloomberg reported that 36% of the shots distributed to states have been administered.

Having achieved the target distribution of 20 million doses by the early part of this month, the next goal must be to ramp up the vaccination rate.

At the time of writing, Nevada had the lowest vaccination rate at 23.8%, with Connecticut the highest at 71.8%.

Looking at a number of the more adversely affected states, the number of vaccinations administered are just not enough.

California and Florida had reported vaccination rates of just 31.7% and 44.0%, with New York at 45.9%.

For a full state-by-state breakdown of vaccination rates, please click here.

Concerns over the speed of availability of the vaccine has led to skepticism and an unwillingness to vaccinate in the U.S.

This is in spite of the continued spike in new COVID-19 cases across the U.S.

Global Vaccination Rates

On a global basis, Bloomberg has reported that a total of 25,839,924 vaccines have been administered as at 10th January.

Per 100 people, the U.S has vaccinated 2.44 doses per 100 people.

Elsewhere, the numbers do vary significantly.

Across the EU, number of vaccines administered are particularly disappointing when considering the reintroduction of lockdown measures.

France has reportedly administered just 93,000 doses, which translates to 0.14 per 100 people.

Germany and Spain have done marginally better, with 0.64 and 0.60 vaccine doses administered per 100.

Leading the 4-most adversely affected, however, is Italy, with 1.04 doses administered per 100 people.

Looking at the UK, 2,000,000 doses have been administered, which is equivalent to 2.99 doses per 100 people.

From the weekend, news hit the wires that the UK government plans to open mass vaccination centers in England to ramp up the daily vaccination rate.

This does bode well for Britain and its fight against the COVID-19 pandemic.

Looking further east, Israel leads the charge, by doses per 100 people, in the fight against the pandemic. As at 10th January, Israel had administered 20.08 doses per 100 people, translating to 1,817,000 doses.

The U.A.E came a distant 2nd, with 10.11 doses per 100 people.

Bahrain was also a front runner, with 6.01 doses administered per 100 people, though the population size is significant smaller.

Figures were not available for Brazil and India that sit behind the U.S as the worst hit by the COVID-19 pandemic.

The Economic Recovery

In terms of nations bringing an end to the COVID-19 pandemic, once vaccination rates exceed infection rates, we can expect economies to begin reopening.

Looking at the global numbers, we continue to expect marked divergence in economic recoveries.

Vaccination rates across some advanced economies remain significantly low, suggesting longer than expected containment measures.

The longer that governments need to maintain containment measures, the greater the economic fallout.

This suggests that EU member states may well lag the U.S, the UK, and parts of the Middle East.

We will need more figures, however, to get a fuller picture. From Asia, China’s low vaccination rate of just 0.64 per 100 people, as at 8th January, has not impeded the economic recovery.

China is an anomaly, however, with the government having managed to curb COVID-19 infection rates.

This is not the same story for the U.S, the UK, the EU, and other parts of the world.

We would therefore need to see a marked increase in vaccination rates across the the U.S and the EU at a minimum to support a sharper global economic recovery.

The Latest COVID-19 Numbers

At the time of writing, there were a total of 90,693,444 confirmed COVID-19 cases and 1,943,171 related deaths.

By geography, the U.S had reported 22,917,334 cases, with India reporting 10,467,431 cases.

Over the weekend, the U.S hit another record high number of new cases. On Saturday, the U.S had reported 278,920 new cases, which sits well above the national daily vaccination rate.

Brazil reported the 3rd highest, with 8,105,790 cases, followed by Russia (3,401,954) and the UK (3,072,349).

France (2,783,256), Italy (2,276,491), Spain (2,050,360), and Germany (1,929,353) reported a combined 9,039,460 cases.

Looking Ahead

As governments look to ramp up vaccination rates, availability of doses will become a factor.

At present, the UK is one of few nations that has access to AstraZeneca, BioNTech/Pfizer Inc. and Moderna Inc.’s vaccines.

For the EU, approval of the AstraZeneca vaccine may be pivotal in its fight against the COVID-19 vaccine.

Other parts of the world have begun to accept China’s COVID-19 vaccines, while waiting on delivery AstraZeneca, BioNTech/Pfizer Inc., and Moderna Inc.

Some governments were too slow in placing orders, resulting in lengthy lead times.

The number of doses that China’s two vaccine producers will be able to manufacture are low, however.

Sinovac will reportedly be able to produce just 300 million doses per year. Sinopharm, by contrast, is looking to produce more than 1 billion doses this year.

With the Chinese government having pledged to support Africa and LatAm, more is needed, however.

It, therefore, becomes all the more essential that a 1 dose vaccine is made available. This would ease manufacturing capacity pressures and materially increase the number of people protected from the coronavirus.

Johnson & Johnson

As things stand, Johnson & Johnson remains the front runner in delivering a much-needed single dose vaccine.

According to recent reports, the vaccine could be available as early as next month.

Safety, efficacy, and production capacity will be key considerations along with cost. For nations lagging behind in the fight against the pandemic, a single dose vaccine would certainly ease the pain.

Morgan Stanley Raises BlackRock’s Target Price to $890 Ahead of Earnings; Forecasts Q4 EPS of $8.89

Morgan Stanley raised their stock price forecast of the world’s largest asset manager BlackRock to $890 from $750 and said supportive financial market backdrop and improving flows trajectory lift fund NAVs and should continue to lead broad-based upward estimate revisions.

BlackRock to report its fourth-quarter 2020 earnings on Thursday, January 14, where the global investment manager is expected to report a profit of $8.66 per share, which represents a year-over-year change of more than +3%, with revenues forecast to grow over 7% year-over-year to $4.27 billion. Morgan Stanley gave a forecast of $8.89 per share.

“For BlackRock (BLK), our estimates are +3% above cons EPS / +2% above cons operating income for the quarter, and see prospects for BLK to surprise on better flows and particularly, flows into higher fee categories that should support organic base fee growth and overall fee rate leading to prospects for upward estimate revisions,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“We’re looking for +6.8% organic growth in 4Q, which is +200bps above consensus of +4.8% org growth. A resurgence in equity ETFs inflows, continued strength in active equities and momentum of ESG flows could be supportive to both flows and fee rate.”

Morgan Stanley gave a base target price of $890 with a high of $1,338 under a bull scenario and $413 under the worst-case scenario. The firm currently has an “Overweight” rating on the asset manager’s stock.

Other equity analysts also recently updated their stock outlook. Jefferies raised the target price to $868 from $816. JP Morgan upped their stock price forecast to $793 from $707. Deutsche bank increased price objective to $835 from $802.

In addition, Citigroup raised their target price on shares of BlackRock to $800 from $690 and gave the company a “buy” rating. Wells Fargo raised their target price to $805 from $700 and gave the company an “overweight” rating.

Nine analysts who offered stock ratings for BlackRock in the last three months forecast the average price in 12 months at $755.00 with a high forecast of $835.00 and a low forecast of $602.00. The average price target represents a -0.19% decrease from the last price of $756.45. From those nine equity analysts, eight rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

BlackRock’s shares closed about 1% higher at $756.45 on Friday; however, the stock rose more than 40% in 2020.

“We believe BlackRock is best positioned on the asset management barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive 10% EPS CAGR (2020-22e) via 5% average long-term organic growth & continued op margin expansion. We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US,” Morgan Stanley’s Cyprys added.

“We expect the premium to widen as BlackRock takes share in the midst of market dislocation and executes on improving organic revenue growth trajectory.”

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Delta Airlines, BlackRock, Citigroup and Wells Fargo in Focus

Earnings Calendar For The Week Of January 11

Monday (January 11)

IN THE SPOTLIGHT: SYNNEX, CARNIVAL

SYNNEX: California-based business process services company’s earnings to decline to $2.89​ per share the fourth quarter, down from $4.26 per share reported the same quarter last year. The leading provider of business-to-business information technology services’ quarterly revenue will fall more than 5% to just over $6 billion from $ 6.58 billion a year ago.

“For the fourth quarter of fiscal 2020, revenues are expected between $6.45 billion and $6.65 billion. Non-GAAP net income is estimated in the range of $190.5 to $203.5 million. Moreover, the company projects non-GAAP earnings between $3.68 and $3.93 per share,” noted analysts at ZACKS Research.

CARNIVAL: The world’s largest cruise ship operator is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.83 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see risk more equity might need to be raised,” Rollo added.

According to the mean Refinitiv estimate from eleven analysts, Carnival Corp is expected to show a decrease in its fourth-quarter earnings to -186 cents per share. Wall Street expects results to range from a loss of $-2.10 to ​a loss of $-1.64 per share, Reuters reported.

Tuesday (January 12)

No major earnings scheduled for release.

Wednesday (January 13)

Ticker Company EPS Forecast
INFY Infosys $0.16
WIT Wipro $0.06
SJR Shaw Communications USA $0.24
INFO IHS Markit Ltd $0.67
AONNY Aeon ADR -$0.11

 

Thursday (January 14)

IN THE SPOTLIGHT: DELTA AIRLINES, BLACKROCK

DELTA AIRLINES: The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report a loss for the fourth consecutive time of -$2.47 in last quarter of 2020 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic. According to Ticket Report, analysts expect Delta Airlines to post $-11 EPS for the current fiscal year and $0 EPS for the next fiscal year.

“Delta is the airline most exposed to corporate travel, which was positive pre-pandemic. Corporate travel remains down 85% and the only corporate traveller flying now appears to be those at small and medium-sized businesses. Delta had hoped for a recovery in business travel in 2H21, but it is becoming increasingly clear that business travel will not be a meaningful contributor to revenue in 2021 as vaccination timelines continue to shift out,” said Helane Becker, equity analyst at Cowen and company.

BLACKROCK: The world’s largest asset manager is expected to report a profit of $8.66 in the fourth quarter, which represents a year-over-year change of more than +3%, with revenues forecast to grow over 7% year-over-year to $4.27 billion.

“We believe BlackRock is best positioned on the asset management barbell given leading iShares ETF platform, multi-asset & alts combined with technology/Aladdin offerings that should drive 10% EPS CAGR (2020-22e) via 5% average long-term organic growth & continued op margin expansion. We see further growth ahead for Alts, iShares, international penetration, and the institutional market in the US,” said Michael Cyprys, equity analyst at Morgan Stanley.

“We expect the premium to widen as BlackRock takes share in the midst of market dislocation and executes on improving organic revenue growth trajectory.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 14

Ticker Company EPS Forecast
DAL Delta Air Lines -$2.47
BLK BlackRock $8.66
TSM Taiwan Semiconductor Mfg $0.94
FRC First Republic Bank $1.52
PRGS Progress Software $0.78

 

Friday (January 15)

IN THE SPOTLIGHT: CITIGROUP, WELLS FARGO

CITIGROUP: New York-based diversified financial services holding company is expected to report a profit of $1.30 in the fourth quarter, which represents a year-over-year slump of more than 30%, with revenues forecast to decline about 10% year-over-year to $16.5 billion.

Citi is trading at just 0.7x NTM BVPS implying a through the cycle ROE of just 7%, well below our 9% estimate for 2023. While there is uncertainty around how much Citi needs to invest in technology to address the Fed and OCC consent orders around risk management, data governance and controls, we believe the stock is cheap even if expenses remain elevated. We have modelled in expenses rising to $44B for 2021 and 2022 well above $42B in 2019,” noted Betsy Graseck, equity analyst at Morgan Stanley.

“Moreover, Citi is not getting credit for its diversification (only 40% of total loans are consumer and only half of those are credit card). Citi also has a more resilient wholesale business, skewed to FX, EM and cash management.”

WELLS FARGO: The multinational financial services company is expected to report a profit of $0.58 in the fourth quarter, which represents a year-over-year slump of more than 30%, with revenues forecast to decline about 9% year-over-year to $18 billion. Seaport Global Securities also issued estimates for Wells Fargo & Company’s Q2 2021 earnings at $0.60 EPS and FY2022 earnings at $3.10 EPS.

“Net interest income is anticipated to be $40 billion for 2020, lower than the previous guidance due to lower commercial loan balances and higher MBS premium amortization. Management expects fourth-quarter origination volume to be similar to third-quarter levels despite typical seasonal declines and fourth-quarter production margins should remain strong,” noted analysts at ZACKS Research.

“The company expects internal loan portfolio credit ratings, which were also contemplated in the development of allowance, will result in higher risk-weighted assets under the advanced approach and under the standardized approach in the coming quarters, which would reduce CET1 ratio and other RWA-based capital ratios.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 15

Ticker Company EPS Forecast
VFC VF $0.90
JPM JPMorgan Chase $2.56
C Citigroup $1.30
WFC Wells Fargo $0.58
PNC PNC $2.59
HDB Hdfc Bank $0.54

 

The Gold Market in 2020 and Beyond

Nobody expected the Spanish Inquisition! And nobody expected a pandemic in 2020! Oh boy, what a year… How good that 2020 has already passed! It was an extraordinary year, unlike any other in many decades. Unfortunately, 2020 was a disastrous time for many people all over the world who suffered from COVID-19 or whose relatives and friends died because of the coronavirus or the collapse of the healthcare system… Our thoughts are with them. Many others lost their jobs or income, and all of us suffered from loneliness and limited freedom during the Great Lockdown . Indeed, it’s good that 2020 is over – and we hope that 2021 will be much better!

And what did 2020 mean for gold? Well, it turned out that last year was gracious to the yellow metal. As the chart below shows, gold entered 2020 with a price of $1,515 per ounce, and finished the year at $1,888 (London P.M. Fix as of December 30). It means that the shiny metal rose over 24 percent – that’s not bad considering other assets were hit really hard during the economic crisis !

Actually, 2020 was definitely better for gold prices than 2019 , when the yellow metal gained “only” over 18 percent. As I didn’t predict the global pandemic (who did?), I didn’t forecast such strong gains in my base scenario. However, given the inversion of the yield curve in 2019, I expected a kind of economic downturn that would positively impact gold prices. One year ago, in a January 2020 edition of the Gold Market Overview , I wrote:

“unless anything ugly happens, the macroeconomic environment could be less supportive for gold than in 2019. However, bad things do happen, and, according to Murphy’s law, anything that can go wrong will go wrong. Hence, the gold fundamentals may turn out to be more positive for gold over the year. After all, the yield curve has inverted last year and we are already observing some recessionary trends, especially in the manufacturing sector and among the small-sized companies (…) given the amount of black swans flying just above the market surface, gold might provide us with some bullish surprises as well.”

And indeed, the black swan (or perhaps a white or gray swan) landed in 2020, pleasing the gold bulls. However, despite gold’s impressive performance, some people complain that gold didn’t rally more during the coronavirus turmoil. I completely understand this disappointment – after all, the world suffered its deepest economic downturn since the Great Depression , larger even than the Great Recession , and gold gained only 24.6 percent?

However, the crisis was deep but very short, as we quickly learnt how to live with the virus, while our brilliant scientists swiftly developed vaccines. Moreover, this time banks were resilient and there was no financial crisis . Another factor is that gold actually rallied more than 36 percent until its peak in August (or more than 40 percent counting from the bottom), but it later corrected somewhat.

Indeed, we can distinguish a few phases in the gold market in 2020:

  • A pre-pandemic bullish phase caused by easy monetary policy and worries about the coronavirus, that lasted until mid-February, with the price of gold increasing from $1,515 to $1,604 (5.9 percent) on February 19, just before the stock market crash.
  • The bullish period (with a short bearish correction) more closely related to the unfolding pandemic, the stock market crash and central banks’ panic and bold responses. It started on February 20 and ended on March 6, when the price of gold reached $1,684 (gaining 5 percent).
  • The bearish phase caused by investors’ panic selloff of all assets in order to raise cash. It lasted until March 19, when the price of gold reached its 2020 bottom of $1,474 (a decline of 12.5 percent).
  • A super bullish phase that lasted until August 6, when the price of gold reached its all-time peak of $2,067, soaring 40.2 percent in just four and half months. This period can be split into: the bullish phase, caused by the coronavirus shock, that lasted until mid-April; the consolidation period, that came when the financial markets calmed down as the initial doomsday scenarios didn’t materialize, and lasted from mid-April to mid-June; and another bullish phase, caused by disastrous economic data for the first half of 2020, and massive stimulus programs delivered by the central banks and governments.
  • The bearish period , during which the yellow metal declined to $1,763 on the last day of November, or 14.7 percent, due to positive vaccine-related news and reduced geopolitical uncertainty after the U.S. presidential elections.
  • The bullish remainder of the year, during which gold rose to $1,888, or 7 percent, caused by the dark COVID-19 winter, poor economic data, strengthened prospects of another government financial stimulus, and related worries about the rising U.S. debt.

So, it’s pretty obvious that the course of the pandemic was one of the most important tailwinds for the gold prices in 2020. Thus, the correction caused by the vaccine breakthroughs is not surprising, given the scale of the previous rally . However, please note that gold reacted not to the pandemic itself, but rather to the investors, governments, and central banks’ reaction to it. The yellow metal gained the most when investors were fearful, and when the Fed and Treasury injected liquidity into the markets.

This all bodes well for gold in 2021. After all, the U.S. central bank won’t cease conducting its very easy monetary policy , while a Biden-Yellen duo will continue the dovish fiscal policy inherited from the Trump administration. Such a policy mix should support gold prices. Of course, the scale of accommodation would be lower than in 2020, so gold’s performance in 2021 could be worse than last year. But unless we see a normalization in the monetary policy and an increase in the real interest rates , the bull market in gold shouldn’t end.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care.

 

Neurocrine Biosciences Shares Rise Despite Disappointing Q4 Earnings; Target Price $121

California-based biopharmaceutical company Neurocrine Biosciences reported worse-than-expected earnings in the fourth quarter as sales disappointed on anticipated inventory destocking; however, the shares rose over 7% on Friday.

The biotech company reported Q4 sales of $240 million and reported wholesaler total prescriptions for the year of 175,200. However, according to the company they sold $18 million less to wholesalers in Q4 which impacted Ingrezza sales.

The company reported a loss of 62 cents loss per share, worse than the market expectations of 3 cents loss.

At the time of writing, Neurocrine Biosciences shares traded 7.4% higher at $110.23 Friday. However, the stock fell about 11% in 2020.

Analyst Comments

“This morning, Neurocrine Biosciences (NBIX) pre-reported preliminary Q4 sales for Ingrezza, and reported a lighter quarter impacted by inventory destocking according to the company. Q4 Ingrezza sales were $240M, and down sequentially by 6% vs Q3 ’20, and lower than consensus estimates of $251.9M and our estimate of $251.6M. Adjusting for inventory, the co-states Ingrezza sales would have grown to $258M.  The co also reiterated pipeline commitments that were previously disclosed,” said Biren Amin, equity analyst at Jefferies.

“NBIX also provided an update on pipeline milestones for 2021, and expects readout from the Phase III trial testing Ingrezza in Huntington’s disease in Q4. We think Huntington’s indication, while niche, could be lucrative from an operating margin view given NBIX is unlikely to incur any add’l major costs once approved. The co also expects to report Phase II from NBI-‘5844s trial in patients with negative symptoms in schizophrenia patients in 1H ’21. Recall, this program was in-licensed from the Takeda collaboration. The Phase II enrolled 234 patients with negative symptoms, and is evaluating three doses: 50, 125, and 500 mg once daily to placebo. The co hopes to see an effect size of 0.3 in the trial. The current valuation attributes little/no value for this program, and therefore a positive outcome could serve as a catalyst.”

Neurocrine Biosciences Stock Price Forecast

Fifteen analysts who offered stock ratings for Neurocrine Biosciences in the last three months forecast the average price in 12 months at $121.00 with a high forecast of $145.00 and a low forecast of $90.00.

The average price target represents a 17.68% increase from the last price of $102.82. From those 15 analysts, nine rated “Buy, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $121 with a high of $143 under a bull scenario and $70 under the worst-case scenario. The firm currently has an “Overweight” rating on the biopharmaceutical company’s stock.

Several other analysts have also recently commented on the stock. Canaccord Genuity cut their price target on shares of Neurocrine Biosciences to $122 from $145 and set a “buy” rating on the stock. Benchmark initiated coverage and issued a “hold” rating for the company.

In addition, Zacks Investment Research cut shares from a “hold” rating to a “sell” rating. BidaskClub raised shares from a “sell” rating to a “hold” rating. At last, Credit Suisse Group dropped their target price to $90 from $105 and set a “neutral” rating.

Check out FX Empire’s earnings calendar

Corona Beer Maker Constellation’s Shares Hit Record High on Strong Earnings; More Upside Likely

New York-based Fortune 500 international beverage alcohol company Constellation Brands’ shares hit a record high on Thursday after the company reported better-than-expected earnings in the fiscal third quarter of 2021.

The corona beer marker reported a profit of $3.09 per share in the third quarter ended November 30, 2020, beating the Wall Street estimate of $2.40 per share, up from $2.14 per share profit seen in the same period a year ago. Constellation Brands posted revenues rose 22% to $2.44 billion, beating the market expectations by over 7%.

Constellation Brands (STZ) delivered strong 44% EPS growth driven by robust beer shipments (+27%) as manufacturing supply comes online and the company works to address inventory out of stocks at retail. Underlying consumer demand also improved, with depletions up 12% in the quarter. Guidance comes up, while the company also introduced a new $2 billion share buyback authorization,” said Vivien Azer, equity analyst at Cowen and company.

The producer and marketer of beer, wine, and spirits forecast 2021 EPS on a comparable basis of between $9.8 and $10.05 per share. That was higher than the market expectations of $9.44. The company expects fiscal 2021 net beer sales growth as much as 9% but forecasts net sales of wine and spirits to decline by 9% to 11%.

Following the earnings result, Constellation Brands shares soared as much as 7.6% to record high of $240.76 on Thursday. However, the stock rose 15.4% in 2020.

“We plan to raise our $226 fair value estimate by a mid-single-digit percentage to reflect time value and stronger near-term beer shipments as the firm continues to rebuild the inventory deficit caused by the production shutdown in Mexico last March. The shares now appear fairly valued to us, but the quality in the business remains as clear as ever and we’d be happy long-term holders,” said Nicholas Johnson, equity analyst at Morningstar.

Constellation Brands Stock Price Forecast

Morgan Stanley gave a base target price of $260 with a high of $302 under a bull scenario and $154 under the worst-case scenario. The firm currently has an “Overweight” rating on the beverage alcohol company’s stock.

Several other analysts have also recently upgraded their outlook. Citigroup raised the price target to $244 from $220. Cowen and company upped the price objective to $275 from $240. Jefferies increased the stock price forecast to $276 from $273. Evercore ISI raised the target price to $275 from $270. RBC upped the price objective to $262 from $243.

Thirteen analysts who offered stock ratings for Constellation Brands in the last three months forecast the average price in 12 months at $228.17 with a high forecast of $273.00 and a low forecast of $154.00.

The average price target represents a -0.31% decrease from the last price of $228.87. From those 13 equity analysts, nine rated “Buy, three rated “Hold” and one rated “Sell”, according to Tipranks.

Analyst Comments

“We expect a re-acceleration to +HSD% beer depletions growth in 2H21 after COVID-related impacts drove a slowdown to +MSD% in 1H21. Our expected improvement is driven by the resolution of beer out-of-stocks, improving shelf-space and market share trends for Constellation Brands (STZ) high-velocity products, as well as innovation contribution (Corona Hard Seltzer),” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“Our robust +HSD% LT beer topline CAGR is driven by favourable sub-category positioning (high-end beer), advantageous demographics (skew to Hispanics), solid pricing, and innovation. Our ~6% 3-year STZ corporate organic sales forecast is above the ~4% growth at beverage peers.”

Check out FX Empire’s earnings calendar

Drugstore Chain Walgreens Shares Soar Over 8% After Q1 Earnings Top Estimates

The largest U.S. drugstore chain Walgreens Boots Alliance reported better-than-expected earnings in the fiscal first quarter and remained broadly consistent in its full-year forecast for earnings growth, sending its shares up over 8% on Thursday.

Walgreens Boots Alliance said its sales increased 5.7% to $36.3 billion in fiscal first quarter ended November 2020, up 5.2% on a constant currency basis. Loss per share was $0.36, compared to EPS of $0.95 in the year-ago quarter, including a $1.73 per share charge from the company’s equity earnings in AmerisourceBergen.

Adjusted EPS decreased by 11.2% to $1.22, down 11.6% on a constant currency basis, reflecting an estimated adverse COVID-19 impact of $0.26 to $0.30 per share. But it beat analysts’ expectations of $1.03 per share.

“Walgreens Boots Alliance (WBA) reported adj. EPS of $1.22, vs. consensus of $1.03. We look for details around the better than expected results in Retail Pharmacy USA and Retail Pharmacy Int’l. FY21guidance was maintained but now skewed positively. Mgmt now expects to see a greater impact from COVID-19 in F2Q, and we look for an update to mgmt’s COVID-19 recovery assumptions,” said Charles Rhyee, equity analyst at Cowen and company.

Drugstore chain maintained its fiscal year 2021 guidance, but with the profile skewed positively. The company continues to forecast expects adj. EPS of low single-digit growth, roughly in-line with consensus of $4.81, which implies growth of +1.5% y/y.

Walgreens forecasts to see a higher adverse impact from COVID-19 in the fiscal second quarter but continues to expect F1H21 adj. EPS to decline 17%-23%, broadly consistent with prior expectations. On a full-year basis, the impact of COVID-19 vaccines is likely offset by COVID-19 related lockdowns and increased growth investments.

Walgreens Boots Alliance shares soared over 8% to $46.48 on Thursday. However, the stock fell over 30% in 2020.

Walgreens Boots Alliance Stock Price Forecast

Seven analysts who offered stock ratings for Tiffany & Co in the last three months forecast the average price in 12 months at $41.20 with a high forecast of $44.00 and a low forecast of $40.00. The average price target represents a -10.47% decrease from the last price of $46.02. All those seven equity analysts, none rated “Buy, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $40 with a high of $46 under a bull scenario and $27 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the pharmacy provider’s stock.

Several other analysts have also recently commented on the stock. Truist Securities raised the price target to $44 from $40. Citigroup upped their price objective to $45 from $40. Cowen and company lowered the stock price forecast to $41 from $46. Deutsche Bank raised the price target to $41 from $40. UBS lowered the target price to $41 from $42.

Analyst Comments

“Walgreens Boots Alliance operates a top 2 retail pharmacy chain in the US as well as Boots Pharmacy and Alliance drug distribution in Europe. With COVID-19 disruption likely to weigh on results for the first part of FY21, at the least, along with ongoing structural reimbursement pressure, EBIT and EPS growth will likely be constrained for the foreseeable future, said Ricky Goldwasser, equity analyst at Morgan Stanley.

“Walgreens has the balance sheet to deploy capital into M&A, as well as the strategic optionality to potentially reposition its portfolio of assets in a changing healthcare marketplace. Unveiling a new strategy under a new CEO that provides a roadmap to future growth is a potential catalyst for shares.”

Check out FX Empire’s earnings calendar

Buy Raymond James Ahead of Earnings, 56% Upside to Stock in Bull Case: Morgan Stanley

Morgan Stanley recommends buying Raymond James Financial ahead of the fiscal first quarter 2021 earnings scheduled for January 27 and said their forecast is at least 9% and 7% above consensus for F1Q21 and  F2021, respectively, and there is more potential upside if additional cost savings and capital deployment come through.

“With markets up 12% in 4Q20, and a vaccine rollout solidifying the V-shaped recovery, we expect revenue growth accelerates from 3% y/y in F2020 to 7% in F2021. We expect Raymond James Financial (RJF) can grow client assets 17.5% y/y in F2021, which includes 6.5% net new money growth and 11% market appreciation,” noted Manan Gosalia, equity analyst at Morgan Stanley.

“RJF has had a strong year in recruiting, and we expect its scale, technology platform, and advisor-first business model will continue to drive strong recruiting activity across all advisor channels, bringing in more client assets. We also believe the drag from lower rates is behind us, with rising earning assets growth offsetting NIM decline to keep Net Interest Income relatively stable at $155-160M a quarter.”

Morgan Stanley gave a base target price of $125 with a high of $156 under a bull scenario and $65 under the worst-case scenario. The firm currently has an “Overweight” rating on the financial holding company’s stock.

Other equity analysts also recently updated their stock outlook. ValuEngine raised Raymond James from a sell rating to a hold rating. JMP Securities increased their price objective to $89 from $86 and gave the company a market outperform rating. Zacks Investment Research cut shares to a hold rating from a buy rating and set a $79 price objective.

In addition, Credit Suisse Group boosted their target price to $83 from $80 and gave the stock a neutral rating. At last, Smith Barney Citigroup upgraded from a neutral rating to a buy rating and raised their price target to $112 from $87.

Seven analysts who offered stock ratings for Raymond James Financial in the last three months forecast the average price in 12 months at $107 with a high forecast of $125 and a low forecast of $83. The average price target represents a 7.01% increase from the last price of $99.99. From those seven equity analysts, five rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Raymond James Financial’s shares closed about 6% higher at $99.99 on Wednesday; however, the stock is rose about 7% in 2020.

“Raymond James Financial (RJF) is trading at 11.5x our C2022 EPS. Yes, lower rates are putting pressure on NIM, but net new money is growing at 6.5%, with market appreciation on top. We expect multiple starts rising toward our 14.5x target as Net Interest Income stabilizes from here,” Morgan Stanley’s Gosalia added.

“We believe Covid-19 disruption presents unique trigger points for consolidation in the wealth management industry. We expect advisors will increasingly join larger players that can offer access to capital, provide technology capabilities, and improve efficiency and advisor productivity. With its superior technology offering and advisor first business model, RJF is well-positioned to capitalize on this trend.”

Markets Recover Some Losses, While Eyeing Georgia

Stocks gained on Tuesday (Jan. 5) after the major indices all sold off to start the year on Monday (Jan. 4).

News Recap

  • The Dow Jones closed 167.71 points higher, or 0.6%, at 30,391.60. The S&P 500 advanced 0.7% and the Nasdaq climbed nearly 1%
  • The Georgia Senate run-off elections on Tuesday (Jan. 5) were the main focus of investors. At the time of publication, Democrat candidate Raphael Warnock was declared the winner over the incumbent Republican Kelly Loeffler for the first Senate seat up for grabs. The other contested seat between Democrat Jon Ossoff and incumbent Republican David Perdue had yet to be called.
  • The balance of power in the Senate depends on these results and markets could be volatile. Many believe that if the Democrats sweep the Georgia seats and win control, then higher taxes and progressive policies could hurt the market. On the other hand, others believe that a Democrat sweep could bring on larger and quicker stimulus relief.
  • Better-than-expected ISM U.S. manufacturing data came in and helped stocks higher. According to the ISM, manufacturing rose to 60.7 in December from 57.5 in November. The consensus was that the index would slightly decline to 57.
  • Energy stocks led the S&P higher and soared by 4.5% after Saudi Arabia agreed to voluntary production cuts in February and March. Oil giants such as Chevron (CVX) rose 2.7% as a result.
  • Oil futures surged by 4.9% and briefly broke past $50 a barrel for the first time since February.
  • Copper is a precious metal traditionally seen as a leading indicator for the global economy. On Tuesday (Jan. 5), it hit its highest level in nearly eight years and gained more than 2%.
  • Gold also reached an 8-week high due to more declines from the dollar.
  • Boeing (BA) was the best-performing Dow stock and gained 4.4%.
  • U.K. Prime Minister Boris Johnson on Monday (Jan. 4) announced a national lockdown to slow the spread of a new, more contagious, coronavirus strain. Under these restrictions, people are only allowed to leave their homes for essentials, work (if they can’t from home) and exercise. Most schools, including universities, will also move to remote learning.
  • According to data compiled by Johns Hopkins University , more than 85 million COVID-19 cases have been confirmed globally, including 20.8 million in the U.S. and 2.7 million in the U.K.
  • Meanwhile, over 5 million people in the U.S. have now received a COVID-19 vaccination.

After stocks sharply dropped on Monday (Jan. 4) to kick off 2021, widespread gains on Tuesday (Jan. 5) offset some of these losses. While Monday (Jan. 4) was the first time since 2016 that the Dow Jones started a year off with declines, two major catalysts sent the major averages higher: the oil production agreement reached between OPEC and Russia, and better than expected manufacturing results from December.

This tug of war between good news and bad news can be expected in the early part of this new year. Although Monday (Jan. 4) witnessed a sharp pullback (and in my opinion, a predictable one), Tuesday (Jan. 5) witnessed a reversal. In general, though, I still believe that markets have overheated and that between now and the end of Q1 2020, a correction could likely happen.

Markets have overheated, and I believe that much of the good news ranging from economic stimulus to vaccines has been baked in. Eventually, the reality on the ground will outweigh the positive news in the short-term.

National Securities’ chief market strategist Art Hogan put it best in my opinion, saying that he believes we could see a 5%-8% pullback as early as this month. Hogan said that

“we have a tug of war between virus news and vaccine news the better part of six months, and that’s been balanced off by stimulus…That seems to be behind us, and right now I think the virus news takes over a little bit.”

Additionally, if the Georgia elections on Tuesday (Jan. 5) go as I think they’ll go (Democrat sweep), it could be a short-term catalyst leading to a potential correction. The balance of power in the U.S. Senate is at stake with these elections. Investors are likely to prefer a divided Senate. If the Democrats sweep and wrestle away Senate control from the Republicans, it could leave President Biden’s powers largely unchecked, and enable him to pass more ambitious, progressive, and less market-friendly policies.

At the time of this publication, Democrat candidate Raphael Warnock was declared the winner over the incumbent Republican Kelly Loeffler for the first Senate seat up for grabs. The other contested seat between Democrat Jon Ossoff and incumbent Republican David Perdue had yet to be called.

According to John Stoltzfus , chief investment strategist at Oppenheimer Asset Management , the S&P 500 could fall by 10% if the Democratic candidates sweep the Georgia runoffs.

“It is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s run-off results in a sweep for the Democrats — providing them with control of the Senate as well as the House — that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” Stoltzfus said.

On the other hand, a Democrat sweep could mean potentially larger stimulus packages – and soon.

There is optimistic potential, but the road towards normality will hit inevitable speed bumps and uncertainty. This Senate election and the potential market reactions reflect that.

If and when a correction does happen, I believe it will be healthy and a good thing. Corrections are normal market behaviors and happen more frequently than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). Since we have not had one since March 2020, I believe we are long overdue, and the catalysts are there. Most importantly though, a correction could be a great buying opportunity for what I believe will be a strong second half of the year.

While there will certainly be short-term bumps in the road, I love the outlook in the mid-term and long-term once vaccines become more widely available. The pandemic is awful right now, and these new infectious strains are quite concerning. But despite this, I believe the positive manufacturing data released on Tuesday (Jan. 5) is a step in the right direction, especially considering all the restrictions that most countries are living through.

The consensus is that 2021 could be a strong year for stocks. According to a CNBC survey which polled more than 100 chief investment officers and portfolio managers, two-thirds of respondents said the Dow Jones will most likely finish 2021 at 35,000, while five percent also said that the index could climb to 40,000.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is very possible. But I do not believe, with conviction, that a correction above ~20% leading to a bear market will happen.

Driving

Small-Caps (IWM)

Figure 1 – iShares Russell 2000 ETF (IWM)

After seeing a sharp pullback since Christmas week, the Russell 2000 briefly returned to its winning ways on Tuesday (Jan. 5). The IWM Russell 2000 ETF which tracks the small-cap index witnessed a 1.55% gain – its best day in a while.

Although I genuinely love small-cap stocks in the long-term as the world will eventually reopen, I believe that in the short-term the index has overheated. Until the start of this week, the RSI for the IWM Russell 2000 ETF was at an astronomical 74.54. Although the RSI is at a more manageable 62.84, I still believe that the party of seeing vertical gains is over for now.

Small-caps in the short-term will be more sensitive to bad news, and right now there is a lot. Vaccine gains have possibly been baked in by now and stocks just don’t go up vertically the way that the Russell 2000 did between November and late December. It is very possible that small-caps in the near-term could trade sideways before an eventual larger pullback. I truthfully hope small-caps decline a minimum of 10% before jumping back in for long-term buying opportunities.

For now, SELL and take short-term profits if you can – but do not fully exit positions .

If there is a pullback, this is a STRONG BUY for the long-term recovery.

Diving

US Dollar ($USD)

Figure 2 – U.S. Dollar ($USD)

I have zero faith in the U.S. Dollar as a safe asset, even if we may see some short-term volatility and “risk-off” trades. I still am calling out the dollar’s weakness after several weeks despite its low levels. I expect the decline to continue as well thanks to a dovish Fed.

Any time the U.S. Dollar rallies, it is simply “fool’s gold.” Since I started doing these newsletters about a month ago, I have consistently said that any minor rally the dollar would experience would be a mirage. Since the dollar briefly pierced the 91-level on December 9th, it has fallen over 1.8%. Despite the dollar experiencing another mini-rally and nearly piercing the 91-level again on December 22, I remained steadfast in my bearish outlook of the dollar. Since the open on December 23rd, the U.S. Dollar has declined another 1.25%. I believed the dollar would drop back below 90 before the new year, and here we are to start off 2021 with the dollar at 89.41. Since hitting a nearly 3-year high on March 20th, the dollar has plunged nearly 13.8% while emerging markets, foreign currencies, precious metals, and cryptocurrencies continue to strengthen. Gold for example reached an 8-week high on Tuesday (Jan. 5)

On days when COVID-19 fears outweigh any other positive sentiments, dollar exposure might be good to have since it is a safe haven. But in my view, you can do a whole lot better than the U.S. dollar for safety.

I have too many doubts on the effect of interest rates this low for this long, government stimulus, strengthening of emerging markets, and inflation to be remotely bullish on the dollar’s prospects over the next 1-3 years. Meanwhile, the US has $27 trillion of debt, and it’s not going down anytime soon.

Another headwind to consider for the dollar is the Georgia Senate election. If Democrats sweep, there could be more aggressive stimulus in the near term. With Democrats controlling both the House and the Senate, more stimulus could be bearish for the dollar.

Additionally, according to The Sevens Report , if the dollar falls below 89.13, this could potentially raise the prospect of a further 10.5% decline to the next support level of 79.78 reached in April 2014. With the dollar now at 89.41, we are coming dangerously close.

The dollar’s RSI is also nearly oversold once again and is trading significantly below both its 50-day and 200-day moving averages.

For now, where possible, HEDGE OR SELL USD exposure.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

COVID-19 Vaccine Update – EMA Recommends Moderna Inc. Vaccine.

The Latest

Following the authorization for the BioNTech/Pfizer Inc. vaccine authorization late last year, the EMA was back in action this week.

Today, the EMA’s human medicines Committee (“CHMP”) recommended the COVID-19 Moderna Inc. vaccine for authorization.

According to the EMA, the CHMP thoroughly assessed the data on the quality, safety, and the efficacy of the vaccine.

The EMA recommended by consensus a formal conditional marketing authorization be granted by the EU Commission.

Emer Cooke, the Executive Director of the EMA, stated that the vaccine provides the EU with another tool to overcome the current emergency.

The EMA also noted:

  • A very large clinical trial showed that the COVID-19 Vaccine Moderna was effective at preventing COVID-19 in people from 18 years of age.
  • Efficacy was calculated in around 28,000 people from 18 to 94 years of age. All had no sign of previous infection.
  • The trial showed a 94.1% reduction in the number of symptomatic COVID-19 cases in the people who received the vaccine.
  • Additionally, the trial also showed 90.9% efficacy in participants at risk of severe COVID-19.
  • Healthcare providers must give two injections of the COVID-19 Vaccine Moderna, 28 days apart.

As a result of the recommendation, the EU Commission will now fast-track the approval process.

Once the EU Commission has granted conditional marketing authorization for the vaccine, Moderna Inc. can begin to distribute the vaccine across the region.

Vaccine Orders

Late last year, the EU had ordered an additional 80m doses of the Moderna Inc. vaccine. The latest order was in addition to 80m doses that had been previously ordered.

While the distribution of the Moderna Inc. vaccine likely to commence in a matter of days, the EMA has yet to review the AstraZeneca vaccine.

According to the latest reports, the EMA is awaiting additional data in order to being the review process.

Speed of distribution of the vaccine and vaccination rates will now be key in the fight against the pandemic.

COVID-19 Vaccine Update – U.S Vaccination Rates Should be of Concern

The Latest

Late last year, the global equity markets found further upside, supported by the rollout of multiple vaccinations.

Unprecedented progress by global pharmas towards COVID-19 vaccines has given governments a choice of 5 vaccines to date.

A 6th vaccine is expected shortly, with Johnson & Johnson expected to be the next pharma to deliver a vaccine.

While the availability of multiple vaccines is certainly a positive, availability of vaccines and vaccination rates remain key to bringing an end to the COVID-19 pandemic.

This week, the U.S government published the best and worst vaccination rates across U.S hospitals.

When considering the impact of the COVID-19 pandemic on the U.S economy and beyond, low vaccination rates should be of some concern.

While the U.S government has enforced containment measures, there has been no enforcement on vaccinations.

To make matters worse, limited supply of COVID-19 vaccines have added to a slow rate of inoculation across the country.

According to the U.S government, the number of vaccines administered have fallen well short of the 20 million that the Trump administration had projected before the end of 2020.

Supply and demand have both contributed to the lower rate of vaccinations across the country.

All of this ultimately means that the vaccination of phase 1 groups a, b and c will take far longer than initially predicted.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 86,834.916, with the total number of related deaths rising to 1,875,520.

In the U.S, the total number of cases now stands at 21,578,606, with 356,620 related deaths.

The total number of cases in the U.S is double that of India’s 10,375,478, which is the 2nd most affected nation.

Across the 4 most adversely affected EU member states, the total number of cases stood at 8,658,967, with 230,551 related deaths.

The Outlook

An introduction of AstraZeneca’s vaccine to the U.S and a successful end to Johnson & Johnson’s clinical trials would ease supply issues.

This won’t address issues that governments face in terms of demand, however.

For those that don’t fall within priority groups, the bigger question is whether the slow rollout will further delay mass vaccinations.

With many nations now going through the winter months, vaccinations would need to be completed before next winter.

This gives governments as little as 9-months before seasonal changes kick and raise the prospects of another pickup in new cases.

From a market perspective, bringing an end to the COVID-19 pandemic before the summer would support a strong economic recovery.

A post-summer end, however, could result in a slower pace of recovery or even bring into doubt a recovery.

Looking at the U.S, U.S labor market conditions remain woeful. Failure to take control of Operation Warp Speed would weigh heavily on consumption.

At some point, therefore, we could see a greater influence of vaccination rates and supply on the global financial markets.

Daily vaccination rates and new daily COVID-19 cases will need to be monitored near-term. At a minimum, we will need to see an improving trend between daily vaccinations and new daily cases

No Enforcement at Federal Level

Across the U.S, more than 200,000 new COVID-19 cases are being reported each day. At the current rate of spread, the number of COVID-19 vaccines administered fall short of the number of new daily cases.

Less than 10% of the U.S population have caught the COVID-19 virus to date. The number of new cases would, therefore, likely continue to spike.

Such an eventuality would have a far more material impact on the U.S economy and labor market conditions.

It is, therefore, in the best interest of the U.S government to enforce vaccinations. Particularly in more adversely affected U.S states.

Until now, there has yet to be any talk of enforcement at federal or even state level…

Jeweler Tiffany Reported Record Net Sales in 2020 Holiday Period

Tiffany & Co, luxury jewellery and specialty retailer, said on Tuesday that it reported record net sales for the 2020 holiday period as consumers stuck at home during the COVID-19 pandemic shopped more online.

The specialty retailer, which was bought by the world’s largest luxury goods conglomerate LVMH, said its overall preliminary net sales climbed nearly 2% year-over-year in the last two months of 2020, which included sales of over 80% sales from e-commerce.

“LVMH and Tiffany (TIF) announced LVMH will acquire TIF for $135/share in November 2019, and following potential transaction risk in September 2020 and subsequent legal disputes, both parties agreed to a slightly reduced $131.50/share purchase price in October 2020,” noted Kimberly Greenberger at Morgan Stanley.

“Despite the slightly amended acquisition price, the transaction valuation remains in line with LVMH’s precedent transactions, and appears reasonably haircut to reflect COVID-19’s impact on TIF’s cash flows. We continue to see solid strategic rationale, as TIF’s status as a dominant luxury brand, global expansion potential, and pricing power make it a fundamentally attractive business”

During this period, we saw the Chinese Mainland market continue to drive our overall sales growth with certain other Asia Pacific markets also supporting the increase of approximately 20% for that region, said chief executive officer Alessandro Bogliolo.

Tiffany & Co shares closed nearly flat at $131.43 on Tuesday. However, the stock fell about 2% in 2020.

Tiffany & Co Stock Price Forecast

Three analysts who offered stock ratings for Tiffany & Co in the last three months forecast the average price in 12 months at $131.50 with a high forecast of $131.50 and a low forecast of $131.50. The average price target represents a 0.05% increase from the last price of $131.43. All those three equity analysts rated “Hold”, according to Tipranks.

Morgan Stanley gave a base target price of $131.5 with a high of $131.5 under a bull scenario and $114 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also recently commented on the stock. Jefferies raised the target price to $132 from $120. Zacks Investment Research upgraded Tiffany & Co. to a buy rating from hold and set a $129 price target in September. UBS Group lowered their price target to $123 from $135 and set a neutral rating for the company. Wells Fargo & Company lowered their price target to $120 from $135 and set an equal weight rating.

Analyst Comments

“Tiffany, which saw its shares rising in the past three months, agreed upon the new takeover price. The company in its third-quarter fiscal 2020 release confirmed that the merger with LVMH is likely to conclude in early 2021. Markedly, the company reported better-than-expected results. While quarterly earnings grew year-over-year driven by prudent cost management, net sales declined from the year-ago period,” noted equity analysts at ZACKS Research.

“Nonetheless, the rate of sales decline decelerated sharply on a sequential basis. Strong sales in Mainland China and sturdy e-commerce business aided the upbeat performance. Management now envisions a low-double-digit percentage increase in operating earnings and a high-single-digit percentage growth in earnings per share for the final quarter. However, Tiffany anticipates amid-single-digit percentage decline in total net sales for the quarter.”

Major Averages Plummet to Start 2021

Quick Update

In a quick update to kick off 2021, I wanted to summarize my correct calls, and what I profited on since beginning to publish these updates. While nobody can predict the future, the major calls I am most proud of since writing these letters are calling the short-term downturn in small-cap stocks, adding emerging market exposure, and hedging or selling the U.S. dollar.

I switched my call on small-caps, specifically the Russell 2000 from a HOLD to a short-term SELL on December 16th. The iShares Russell 2000 ETF (IWM) surged to unprecedented record gains since November 2020, however, I believed then and still believe that the index has overheated by many measurements. Since December 16th, the IWM ETF is largely flat.

However, since peaking on December 23rd, the IWM has underperformed ETFs tracking the larger indices and has declined by nearly 3%. While I am still bullish on small-caps in the long run and maintain my STRONG BUY call on the Russell for the long-term, it is contingent on a pullback . I believe that pullback may have begun. I am hoping for a minimum 10% decline before jumping back in for the long-term.

Emerging markets have been some of the best performers in 2020, and I have made some bullish calls on specific regional markets for 2021 as well. I have been touting emerging markets since my first report, but when I switched my focus to specific regions, my calls became even more correct. I called Taiwan ( EWT ETF) the best bet for emerging market exposure while avoiding the risks and baked in profits of China on December 3rd. Since then, the EWT ETF which tracks Taiwan has gained over 7% while the MCHI ETF which tracks China has barely gained over 1.4%. The Taiwan ETF has also outperformed the SPY S&P 500 ETF and the IEUR ETF which tracks Europe.

In conjunction with my bullish calls on emerging markets, my bearish calls on the U.S. dollar were also correct. Since I started doing these newsletters about a month ago, I consistently said that the dollar should be hedged or avoided because of the Fed’s policies, effect of interest rates this low for this long, government stimulus, strengthening of emerging markets, and inflation. I also said that any minor rally the dollar would experience would be fool’s good.

Since the dollar briefly pierced the 91-level on December 9th, it has fallen nearly 1.4%. Despite it experiencing another mini-rally and nearly piercing the 91-level again on December 22, I remained steadfast in my bearish outlook of the dollar. Since the open on December 23rd, the U.S. Dollar has declined another 0.77%. I believed it would drop back below 90 before the new year, and here we are to start off 2021, with the dollar at 89.85.

Markets kicked off the first trading day of 2021 with a dud, due to further concerns of COVID-19 cases and the Georgia Senate run-off elections.

News Recap

  • Monday (Jan.4) marked the first negative start to a year for the Dow Jones since 2016. The Dow Jones closed 382.59 points lower, or 1.3%, at 30,223.89. The Dow at one point fell more than 700 points.
  • The S&P 500 also fell 1.5% to 3,700.65, the Nasdaq fell 1.5%, and the small-cap Russell 2000 fell 1.47%.
  • This was the biggest one-day sell-off since Oct. 28 for the Dow and S&P 500, and the Nasdaq’s worst sell-off since Dec. 9.
  • While the sell-off to start the year could be due to natural consolidation, the growing number of COVID-19 cases around the world and its potential impact on the global economic recovery weighed on investors. To start the year off, U.K. Prime Minister Boris Johnson announced a national lockdown to slow the spread of a new, more contagious, coronavirus strain. With this lockdown, people are only allowed to leave their homes for essentials, work if they can’t from home, and exercise. Most schools, including universities, will also move to remote learning.
  • According to data compiled by Johns Hopkins University , more than 85 million COVID-19 cases have been confirmed globally, including 20.7 million in the U.S. and 2.7 million in the U.K.
  • Pay very close attention to the Georgia Senate run-offs on Tuesday (Jan. 5). The balance of power in the Senate is hanging on the vote and markets could be volatile due to the results. If the Democrats gain a majority, it could impact market performance and leave Biden’s powers largely unchecked. If the Republicans keep just one seat, it could likely check Biden’s more progressive ambitions.
  • Coca-Cola (KO) and Boeing (BA) were the laggards on the Dow, falling 3.8% and 5.3%, respectively. Real estate stocks were the worst performing on the S&P and fell 3.2%. Utilities also declined 2.6%.
  • About 4.6 million people in the U.S. have now gotten a COVID-19 vaccine.

Stocks dropped sharply on Monday (Jan. 4), to kick off 2021. It was the first time since 2016 that the Dow Jones started a year off with declines and was the biggest one-day sell-off since Oct. 28 for the Dow and S&P 500. It was also the Nasdaq’s worst one-day decline since Dec. 9.

Several catalysts can be blamed for the gloomy start to the year: natural consolidation, COVID-19, and the Georgia Senate runoff elections.

First and foremost, a decline like this was bound to happen, and I called this happening in the early part of the year. I still believe that there will be a short-term tug of war between good news and bad news, and that these moves are manic and based on sentiment. There was no pullback to end 2020 as I anticipated, but I still believe that markets have overheated in the short-term. Was Monday (Jan. 4) the start of a correction? Possibly. But either way, I think that between now and the end of Q1 2020, a correction could happen.

Carl Icahn seemingly agrees with me, and told CNBC on Monday (Jan. 4), “in my day I’ve seen a lot of wild rallies with a lot of mispriced stocks, but there is one thing they all have in common. Eventually they hit a wall and go into a major painful correction.”

I believe, though, that corrections are healthy and could be a good thing. Corrections happen way more often than people realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). I believe we are overdue for one since there has not been one since the lows of March 2020. This is healthy market behavior and could be a very good buying opportunity for what I believe will be a great second half of the year.

Meanwhile, COVID-19 continues surging and there are very real fears of new strains discovered in the U.K. and South Africa that could be more contagious. U.K. Prime Minister Boris Johnson announced a national lockdown that could potentially last until mid-February. With this lockdown, people are only allowed to leave their homes for essentials, work if they can’t from home and exercise. Most schools, including universities, will also move to remote learning. This could be an ominous sign for stricter lockdowns to be implemented in other regions across the world.

Outside of COVID-19, political uncertainty has returned to the markets. The balance of power in the U.S. Senate is at stake, with Georgia run-off Senate elections set to occur on Tuesday (Jan. 5). Investors are likely to prefer a divided Senate. If the Democrats win both elections and wrestle away Senate control from the Republicans, it could leave President Biden’s powers largely unchecked, and enable him to pass more of his ambitious and progressive policies. Many investors do not anticipate these to be very market friendly. As results start to come in Tuesday evening, markets could react in a volatile manner.

According to John Stoltzfus , chief investment strategist at Oppenheimer Asset Management, the S&P 500 could fall by 10% if the Democratic candidates win the Georgia runoffs.

“It is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow’s run-off results in a sweep for the Democrats — providing them with control of the Senate as well as the House — that it would bode ill for business with the likelihood that corporate tax rates could rise substantially,” Stoltzfus said.

This will also be a busy week for economic data with the manufacturing PMI report said to be released Tuesday (Jan. 5) and the non-farm payrolls report set to be announced Friday (Jan. 8).

Monday’s sell-off (Jan. 4) serves as a very painful reminder that markets will still have to weigh the near-term risks against some of the more positive mid-term and long-term hopes on vaccines and re-opening.

The general consensus is that 2021 could be a strong year for stocks, despite short-term headwinds. According to a CNBC survey which polled more than 100 chief investment officers and portfolio managers, two-thirds of respondents said the Dow Jones will most likely finish 2021 at 35,000, while five percent also said that the index could climb to 40,000.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is very possible. But I do not believe, with conviction, that a correction above ~20% leading to a bear market will happen.

Does the Dow Approach 31,000 or 29,000 Before Mid-2021?

I have too many short-term questions for the Dow Jones. I believe it’s just as likely for the Dow to touch 29,000 again as it is to touch 31,000 before March.

After trading as low as around 29,650 at one point before the new year (Dec. 21), the Dow has remained firmly above 30,000. However, it has traded largely sideways over the last few weeks, despite opening Jan. 4 with a record high.

Despite some long-term optimism, for now, my short-term questions take precedence. I don’t like how COVID-19 is trending (who does?), I am disappointed in the vaccine roll-out, and I am concerned about the Georgia election. In the short-term, I am not convinced that the Dow will stay above 30,000 for more than a week at a time and I am also not convinced that it will hit more all-time highs before March.

In the short-term, I believe it is just as likely for the Dow to approach 29,000 as it is to approach 31,000 in the early months of 2021.

While I think a 35,000 call to close out 2021 is a bit aggressive, I do believe that the second half of 2021 could show robust gains for the index.

With so much uncertainty and the RSI still firmly in hold territory, the call on the Dow stays a HOLD.

This is a very challenging time to make a call on the Dow with conviction. But one thing I do believe is that if and when there is a drop in the index, it will not be strong and sharply relative to the gains since March 2020. I believe that it is more likely than not that we will be in a sideways holding pattern until vaccines are available to the general public by mid-2021.

For an ETF that attempts to directly correlate with the performance of the Dow, the SPDR Dow Jones ETF (DIA) is a strong option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

SVB Financial to Acquire Boston Private in $900 Million Deal; Analysts Lift Target Price

SVB Financial Group, the parent of Silicon Valley Bank, announced that it will acquire a financial holding company Boston Private in a deal worth nearly $900 million to accelerate its private bank and wealth management offering.

This acquisition gives SVB Financial another avenue to expand deeper into its tech-focused client base. According to the deal, Boston Private shareholders will receive 0.0228 shares of SVB common stock and $2.10 of cash and it is expected to close in the middle of 2021.

“Overall, we applaud the deal given the strategic rationale is compelling and the financial metrics are favourable albeit modestly so. Our lone concern is that management appears open to pursuing Boston Private (BPFH) lending verticals like C&I, CRE and multi-family, which are all outside SVB Financial’s (SIVB) core focus. Although a more comprehensive loan product offering would help SIVB drive down excess liquidity (45% loan/deposit ratio) and mitigate capital call concentration (53% of loans), it would represent a  diversification into garden variety commercial bank products that run counter to SIVB’s core focus on innovation markets,” said Casey Haire, equity analyst at Jefferies.

“The BPFH loan portfolio is small (only 16% of pro forma loans) and thus not an immediate risk, but if management were to pursue aggressive diversification, it could potentially weigh on valuation metrics and/or expose the bank to higher credit loss.”

SVB Financial shares closed nearly flat at $387.34 on Monday. However, the stock rose over 50% in 2020.

SVB Financial Stock Price Forecast

Twelve analysts who offered stock ratings for SVB Financial in the last three months forecast the average price in 12 months at $377.00 with a high forecast of $440.00 and a low forecast of $300.00. The average price target represents a -2.67% decrease from the last price of $387.34. From those 12 equity analysts, six rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $385 with a high of $485 under a bull scenario and $212 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the commercial bank’s stock.

Several other analysts have also recently commented on the stock. SVB Financial Group had its target price hoisted by analysts at Royal Bank of Canada to $437 from $320. The firm presently has an “outperform” rating on the bank’s stock. Barclays cut rating to an “equal weight” rating from an “overweight” and upped their price objective to $440 from $305. Wells Fargo upgraded to an “equal weight” from an “underweight” rating and upped their price target to $325 from $210.

Analyst Comments

“SVB Financial (SIVB) is one of the fastest-growing banks in our coverage universe, with an average of 20%+ loan and deposit growth annually since 2010, with the growth driven by its unique niche of lending to the technology and life sciences industries, including PE and VC capital call lines. While we expect growth to slow, we still see low-teens loan growth (well above peers) for the next several years,” noted Ken Zerbe, equity analyst at Morgan Stanley.

“We are Equal-weight the shares due to valuation. SIVB is trading at just over 20x forward earnings and more than 10 P/E points above its peers (versus a 4-6x multiple premium that we believe it deserves). SIVB’s earnings are highly sensitive to changes in Fed funds. Rate increases would drive higher EPS.”

Upside and Downside Risks

Risks to Upside: Higher interest rates. Stronger-than-expected loan growth. Credit costs remain at historically low levels. An increase in PE/VC investment, driving an increase in capital call line demand – highlighted by Morgan Stanley.

Risks to Downside: Significantly higher credit costs. Lower-than-expected interest rates. As significant slowdown in P/E, VC, and Tech investment, leads to slower loan growth.

Will the Fed Support Gold Prices in 2021?

Gold ended 2020 at $1,891, partially thanks to monetary policy easing. In 2021, the Fed may not trigger a comparable rally in gold, but it should offer gold prices some support.

Welcome to 2021! I hope that it will be a wonderful year for all of you; a much healthier, calmer and normal year than 2020 was. And even more profitable of course! Indeed, at least gold bulls could be satisfied with the last year, in which the price of gold jumped from $1,523 to $1,891 ( London A.M. Fix )! It means that the yellow metal gained more than 24 percent, as the chart below shows.

I know that 24 percent does not look impressive compared to Bitcoin , which gained more than 260 percent in 2020, but it’s still a great achievement relative to other assets or gold in the past. Not to mention the fact that gold’s price level looks more sustainable, while the recent parabolic rises in cryptocurrencies suggest a price bubble .

One of the reasons behind gold’s rally was the easy monetary policy adopted by the Fed (and other central banks) in a response to the pandemic and related economic crisis . In a way, the Fed reintroduced the quantitative easing first implemented in the aftermath of the Great Recession . So, gold’s bullish move shouldn’t be surprising.

However, there are also some important differences in the monetary policy that followed the global financial crisis and the coronavirus epidemic . First, when Lehman Brothers went bankrupt, the Fed went big. But when COVID-19 infections spread widely through America, the Fed went not only big, but also fast!

Just look at the chart below. As you can see, it took just about two months for the U.S. central bank to slash the federal funds rate to zero in the spring of 2020, while it took over a year during the Great Recession.

Moreover, from February to November, i.e., in just nine months, the Fed expanded its balance sheet by about $3 trillion, while a decade ago, such an increase took over six years!

Implications for Gold in 2021

What does the difference in the Fed’s stance imply for the price of gold in 2021? Well, on one hand, because the Fed acted aggressively, there is less room for further monetary policy easing . In the aftermath of the Great Recession, the Fed gradually fired from increasingly powerful weaponry, announcing new rounds of asset purchases from 2007 to 2013, while in a response to the coronavirus, the Fed has fired a bazooka at the outset. This decreases the odds for further monetary policy easing, pushing market expectations towards normalization. You see, when you are at the bottom, the only possible move is up.

This is my biggest worry for the gold market in 2021: that monetary policy has already become so dovish, that now it can be only hawkish – at least on a relative basis. The real interest rates are so low that – given the prospects of economic recovery on a horizon – they can only go up, especially if inflation does not increase.

On the other hand, inflation could really rise in 2021. Additionally, the fact that the Fed went both big and fast means that the U.S. central bank became more dovish than in the past , which should be positive for the yellow metal. Moreover, a decade ago the central banks at least pretended that they would like to tighten their stance and normalize monetary policy. They even said that quantitative easing would be reversed, and the Fed’s balance sheet would return to its pre-recession level.

Now, the illusions have dissipated. The central banks will buy assets for years to come, if not indefinitely, and there will be no taper tantrum . The eventual exit from the current easy monetary stance will be ultra-slow and gentle. The Fed has a clear dovish bias, so the interest rates may go down further – after all, given the debt trap , the central banks could be forced to cap the bond yields , which should support gold prices.

Therefore, in 2020, the Fed no longer only intervened on a large scale as it did a decade ago, but it also acted quickly. The change of strategy from go big to go big and fast can be positive for gold prices, but only when the market participants do not believe that the Fed is out of ammunition and only when they expect the normalization of interest rates. Although some investors expect an interest rate hike this year, I believe that the Fed will remain dovish and successfully manage market expectations in order to suppress market interest rates. So, although without the next crisis (such as a debt crisis ) or inflation, the price of gold may not rally substantively, it should be supported by the Fed in 2021 .

If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care

 

Alphabet’s Target Price Raised to $2,050 at Morgan Stanley; $2,450 in Best Case

Morgan Stanley raised their stock price forecast on Alphabet Inc to $2,050 from $1,880, assigning an “Overweight” rating and said it expects 20% online advertisement growth in 2021.

Internet giant’s advertising revenues rebounded in the third quarter of last year, with YouTube advertising revenues growing more than 30% to $5 billion from the same period a year ago. The California-based multinational conglomerate also benefited from the strong momentum in Play Store as sales surged during the COVID-19 pandemic lockdown.

“We are also bullish GOOGL ($2,050 price target, 20% upside) on the travel recovery (12-15% of paid search) and strong YouTube trends from an improved direct response offering/more stable branded ad market. We are also optimistic about the sum of the parts narrative as we see Google Cloud disclosure in 1Q:21 shining better light on this potential $375 billion asset,” noted Brian Nowak, equity analyst at Morgan Stanley.

“For perspective, this would imply GOOGL (ex-Cloud) is currently trading at 8x core EBITDA for 11% CAGR ’21-’24 EBITDA growth. Sum of the parts would bring our $2,450 bull case (40% upside) into play.”

Morgan Stanley gave a target price of $2,450 under a bull-case scenario and $1,465 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Alphabet had its price target upped by Robert W. Baird to $2,000. Argus increased their price target to $1,850 from $1,620 and gave the company a buy rating. Credit Suisse Group raised their target price to $1,950 from $1,850 and gave the stock an outperform rating. JP Morgan raised the stock price forecast to $2,050 from $1,870 and gave the stock an overweight rating.

Twenty-eight analysts who offered stock ratings for Alphabet in the last three months forecast the average price in 12 months at $1,944.04 with a high forecast of $2,250.00 and a low forecast of $1,700.00. The average price target represents a 12.62% increase from the last price of $1,726.13. From those 28 equity analysts, 26 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Alphabet’s shares closed 1.51% lower at $1726.13 on Monday; however, the stock is rose over 30% in 2020.

“Google Websites growth is likely to rebound in 2021 as we believe there are several underappreciated products driven by mobile search, strong YouTube contribution, and continued innovation, such as Maps monetization,” Morgan Stanley’s Nowak added.

“Continued expense discipline leads to operating leverage and upward revisions on EPS estimates.”

Health Insurer Centene to Acquire Magellan in $2.2 Billion Deal; Target Price $79

Centene, a diversified multi-national healthcare enterprise, said it will acquire Magellan Health for $95 per share in cash for a total enterprise value of $2.2 billion as the Fortune 500 company is looking to scale its mental health services at a time when Americans struggle with mental health issues associated with the COVID-19 pandemic.

Centene intends to primarily fund the cash portion of the acquisition through debt financing, and J.P. Morgan has provided a $2.381 billion bridge financing commitment. Upon closing, Centene expects its debt-to-capital ratio to be in the low 40% range, and intends to use its strong earnings and cash flows to achieve its targeted debt-to-capital ratio in the upper 30% range within 12 to 18 months post-close, the company noted in the statement.

The deal is expected to complete in the second half of this year.

Centene shares rose 1.45% to $60.90 in pre-market trading on Monday. However, the stock fell over 4% in 2020.

Centene Stock Price Forecast

Thirteen analysts who offered stock ratings for Centene in the last three months forecast the average price in 12 months at $79.15 with a high forecast of $94.00 and a low forecast of $68.00. The average price target represents a 31.85% increase from the last price of $60.03. From those 13 equity analysts, eleven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $94 with a high of $135 under a bull scenario and $55 under the worst-case scenario. The firm currently has an “Overweight” rating on the health insurer’s stock.

Several other analysts have also recently commented on the stock. Truist Securities lowered the target price to $80 from $85. Deutsche Bank decreased the target price to $77 from $83. Stephens cuts target price to $69 from $71. SVB Leerink lowered the target price to $73 from $75. Jefferies cuts target price to $75 from $78.

Analyst Comments

“Centene is the largest Medicaid player with 21% market share. Wellcare acquisition will expand Centene market presence into Medicare Advantage, the fastest-growing market. Since acquisition announcement, standalone Wellcare has outperformed suggesting potential upside to deal accretion based on S-4 estimates (breakeven in Y1 and mid-single-digit accretive in Y2),” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

“Additional upside opportunities from insourcing PBM and the integration of medical and pharmacy benefit. While ACA repeal would be a headwind, we assign a low probability to this outcome.”

Upside and Downside Risks

Risks to Upside: Deal with WCG drives accelerated growth in Medicare Advantage. CNC wins new Medicaid contracts. ACA margins perform at high end of 5%-10% target. RxAdvance grows into a big market pharmacy player. WCG 2019 outperformance drives upside to pro forma EPS -highlighted by Morgan Stanley.

Risks to Downside: Regulatory uncertainty. Loss of core Medicaid contracts. Exchange profitability is less than expected. Medicaid disenrollment.

Tesla 2020 Vehicle Deliveries Top Estimates, But Shy of Elon Musk’s Target

California-based electric vehicle and clean energy company Tesla Inc said on Saturday it delivered higher-than-expected 499,550 vehicles in 2020 but fall short of CEO Elon Musk’s target of 500,000.

The manufacturer of high-performance electric vehicles beats the market consensus of 481,261 vehicles deliveries.

“We don’t see the 4Q20 results moving the bulls or the bears and expect a fierce debate on the stock to continue. All eyes will be on margins given 180,570 deliveries vs. 210,000 capacity and price cuts during the quarter, regulatory credits and commentary on full self-driving (FSD) when Tesla reports results in the coming weeks,” said Jeffrey Osborne, equity analyst at Cowen and Company.

“We are continuing to take a longer-term look at valuation. Now that the electrified mobility transition is well underway, investors are willing to look beyond typical 1- to 2-year multiples, which had been our prior approach in valuing Tesla (TSLA) shares. Our $380 price target is based off of a ~35x EBITDA multiple on our 2025 EBITDA estimate of $12.2bn. Given Tesla’s steady margin performance and industry leadership in both EV market share as well as electrical efficiency, leveraging in-house produced motors, SiC based inverters, and an innovative HVAC compressor system, we believe a “tech like” multiple is warranted. Note we are giving the company no credit for likely future vehicles such as a hatchback for the European market based off the Model 3 platform, larger SUVs, and potentially a delivery an. In addition, we are not modeling any success in full self-driving L4/5 capability through the duration of our model as we remain skeptical,” Osborne added.

Tesla stocks soared more than 700% last year to close December 31 at a record $705.67. In 2020, the electric vehicle manufacturer reported five successive quarterly profits and was included in the S&P 500 index last month.

Tesla Stock Price Forecast

Twenty-five analysts who offered stock ratings for Tesla in the last three months forecast the average price in 12 months at $457.83 with a high forecast of $788.00 and a low forecast of $40.00. The average price target represents a -35.12% decrease from the last price of $705.67. From those 25 equity analysts, seven rated “Buy”, 11 rated “Hold” and seven rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $540 with a high of $1,068 under a bull scenario and $250 under the worst-case scenario. The firm currently has an “Overweight” rating on the electric vehicle producer’s stock.

Several other analysts have also recently commented on the stock. Wedbush increased their target price on Tesla to $560 from $500 and gave the stock a “neutral” rating. Deutsche Bank raised to a “buy” rating from a “hold” rating and increased their target price to $500 from $400 in September. Cfra lowered Tesla to a “hold” rating from a “strong-buy” rating.

Analyst Comments

“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base… over time generating a higher % of revenue from recurring/high-margin services revenue. Services drives the upside. We forecast Tesla’s network services EBITDA as a % of total TSLA EBITDA to reach 12% by 2025, ~19% by 2030 and ~38% by 2040. Tesla Service revenue includes automated driving, infotainment, upgrades, supercharging, maintenance, telematics, etc,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Valuation supportive vs. tech. Including Tesla Network Services, Energy & Insurance to our core auto forecasts, at $540 Tesla trades at 24x EV/EBITDA in 2025 and 5x 2025 sales. Reasonable vs. software & tech hardware comps.”

Earnings to Watch Next Week: Carnival, RPM, Constellation Brands and Walgreens Boots Alliance in Focus

Earnings Calendar For The Week Of January 4

Monday (January 4)

IN THE SPOTLIGHT: CARNIVAL

Carnival, the world’s largest cruise ship operator, is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.84 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see risk more equity might need to be raised,” Rollo added.

According to the mean Refinitiv estimate from eleven analysts, Carnival Corp is expected to show a decrease in its fourth-quarter earnings to -186 cents per share. Wall Street expects results to range from a loss of $-2.10 to ​a loss of $-1.64 per share, Reuters reported.

Tuesday (January 5)

No major earnings scheduled for release.

Wednesday (January 6)

IN THE SPOTLIGHT: RPM INTERNATIONAL

RPM International, manufacturer of specialty chemical product lines, including high-quality specialty paints, protective coatings, roofing systems, sealants, and adhesives, is expected to report a profit of $1.0 in the fiscal second quarter of 2021, up from $0.76 reported in the same quarter last year.

The specialty chemicals company’s revenue could grow more than 4% year-on-year to $1.46 billion.

“Nearly 1/3 of sales are related to U.S. housing and home improvement (the second highest in the industry behind Sherwin-Williams). This continues to be our preferred coatings end market as it benefits from COVID-19 driven home improvement demand, which we think is sustainable. Importantly, RPM has no meaningful auto, aerospace exposure, but does have US infrastructure/construction exposure which could benefit from stimulus policy,” noted Vincent Andrews, equity analyst at Morgan Stanley.

“RPM’s MAP self-help program offers an offset to COVID-19 challenges. Meaningful opportunity remains for improvement in margins, free cash flow conversion, and return of capital to shareholders. Management highlighted upside to MAP targets on the recent conference call,” Andrews added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 6

Ticker Company EPS Forecast
RPM RPM International $1.00
MSM MSC Industrial Direct $1.08
UNF UniFirst $1.68
AUOTY AU Optronics $0.09

Thursday (January 7)

IN THE SPOTLIGHT: CONSTELLATION BRANDS, WALGREENS BOOTS ALLIANCE

CONSTELLATION BRANDS: New York-based Fortune 500 international beverage alcohol company is expected to report a profit of $2.40 in fiscal third quarter, up from $2.14 per share seen in the same quarter a year ago, which would indicate a positive year-over-year growth rate of more than 12%.

The leading beverage alcohol company’s revenue could grow more than 12% year-on-year to $2.26 billion.

“We believe the focus of Constellation Brands’ FQ3 EPS will be on accelerating and above consensus beer depletions to +8.3% y-o-y in FQ3 (vs. 5% in F1H21) with improving beer out-of-stocks, as well as a beer shipment recovery after the under-shipment in F1H21. We also expect an update on beer depletion trends in December, with solid U.S. scanner data trends but likely weakening on-premise trends with more on-premise restrictions, particularly in California (about a quarter of Constellation Brands’ volumes),” said Dara Mohsenian, equity analyst at Morgan Stanley.

“Additionally, we believe investors will focus on beer margins, which we believe could surprise to the upside in FQ3 (we are 20 bps above consensus on beer margins and 2.3% above consensus on beer profit) and in F2H21, with Constellation Brands full year FY21 guidance of flat beer margins implying -160 bps of y-o-y margin declines in H2, with our estimates above guidance at -20 bps y-o-y,” Mohsenian added.

WALGREENS BOOTS ALLIANCE: The largest U.S. drugstore chain is expected to report a profit of $1.03 in fiscal first quarter ended November 2020, representing a year-over-year plunge of -25.6%. The retail pharmacy provider’s revenue could grow about 2% year-on-year to $34.93 billion.

“When Walgreens provided 2021 guidance back on October 15th, management didn’t include any negative impact from additional lockdown measures in Europe or changes to utilization patterns in the US including higher demand for flu vaccines in 1Q but softer demand for cough, cold, and flu products. To reflect how the environment has changed, we have updated our estimates. For 1Q, we now model EPS of $0.98 from $1.14 prior and versus consensus’ $1.03 (range $0.97 – $1.08). Our changes are primarily driven by our estimate of international retail segment sales down -20% y/y and -4.5% sequentially,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“While we are lowering our 2021 estimate to $4.55 from $4.70, our numbers include only the additional hiring of pharmacy technicians throughout the year but not the benefit associated with administrating the vaccines to the general populations. We think the benefit could be as high as a $1.00 – $1.40 split between 2HF21 and 1HF22. In comparison, the consensus is $4.82 and guidance of low single-digit y/y growth implies a $4.78 to $4.87 range.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 7

Ticker Company EPS Forecast
STZ Constellation Brands $2.40
WBA Walgreens Boots Alliance $1.03
CAG Conagra Foods $0.73
HELE Helen Of Troy $3.01
AYI Acuity Brands $1.83
BBBY Bed Bath & Beyond Inc. $0.17
MU Micron Technology $0.69
DCT DCT Industrial Trust -$0.01
WDFC Wd 40 $0.87
PSMT PriceSmart $0.67

Friday (January 8)

No major earnings scheduled for release.

COVID-19 Vaccine Update – The WHO Authorizes the Use of the Pfizer Inc. Vaccine

The Latest

Over the holidays, the World Health Organization approved the emergency use of the Comirnaty COVID-19 mRNA vaccine.

Having been the first vaccine to receive approval by the FDA, the BioNTech/Pfizer Inc. was also the first to receive WHO emergency validation.

The validation is significant as it now allows countries to accelerate approval processes to begin administering the vaccine.

As a result, UNICEF and the Pan-American Health Organization can also begin to procure the vaccine for distribution.

The WHO’s review of the vaccine found the vaccine to meet the WHO safety and efficacy standards.

Additionally, the WHO also requested that other vaccine developers come forward for validation.

COVID-19 cases continue to surge globally as countries struggle to contain the spread of the virus.

Adding to the urgency is the new strain from the UK that is considered more virulent.

While the validation is good news, the Comirnaty vaccine raises logistical and pricing issues. For many countries, the AstraZeneca vaccine will likely be a more viable option. More importantly, AstraZeneca has also engaged vaccine producers across the world to meet global demand.

The World Health Organization’s approval for emergency use of the AstraZeneca vaccine will therefore be a key step in combatting the virus.

Following the UK’s approval of the AstraZeneca vaccine last week, India reportedly approved the vaccine on Friday. Argentina has also approved the emergency use of the vaccine.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 84,349,523.

In the U.S, the total number of cases has risen to 20,614,554, with the total number of related deaths rising to 356,401.

Behind the U.S, India has seen the total number of cases rise to 10,303,409, with Brazil reporting 7,700,578 cases in total.

For France, Germany, Italy, and Spain, the total number of cases stood at 8,461,804, with 224,611 related deaths.

Across the United Kingdom, the total number of cases stood at 2,542,065, with 74,125 related deaths.

Governments expect the numbers to rise following the holidays, however.

What’s next?

Other countries are expected to complete COVID-19 vaccine review processes in the coming weeks.

With France, Germany, Italy, and Spain reporting a combined 8,461,804 total number of cases, more than Brazil, the EMA approvals are key.

Following the EMA’s approval of the BioNTech/Pfizer Inc. vaccine last week, news hit the wires late in the week that the EMA needs more data from AstraZeneca.

In terms of production capacity, price, and logistics, there will certainly be pressure on EMA approval.

From Russia, Sputnik V is also in high demand, with Russia’s vaccine reportedly approved by Argentina. Russia is already delivering the vaccine to countries including Algeria, Bolivia, Guinea, and Serbia.

India and Brazil, however, are reportedly delaying the use of Sputnik V until the completion of more trials.

Concerns over the safety of the Sputnik V vaccine, however, has meant that the West remains reluctant to consider the vaccine.

China’s vaccine has also received a cold reception. Late last week China’s health authorities approved the Sinopharm COVID-19 vaccine for general use. While the West has yet to show interest in the Sinopharm vaccine, the nations within the Middle East have begun to use the Sinopharm vaccine.

In spite of skepticism, successful clinical trials of both China’s and Russia’s vaccines would give governments an ever-widening number of vaccines to choose from.

The good news is that Johnson & Johnson should also be delivering clinical trial data this month.  A 4th vaccine from the West, coupled with China and Russia’s vaccines, would deliver an even wide choice.

Johnson & Johnson currently remains the front runner to deliver the first single-dose vaccine.